Impact investing drives social and environmental progress through investments, while screening for risk and creating competitive returns.
Millennials and women clients are often credited with driving the recent growth in popularity of this type of investing, but recent polling shows most clients are interested in ESG and other types of impact investing. If you’re new to the impact investing landscape, you can find a short primer on the vocabulary and acronyms here. Below are five impact investing trends I’ve seen emerge in 2017.
1. Measurement of Impact
Impact investors increasingly embrace the UN’s Sustainable Development Goals (also known as “SDGs”) as a framework for orienting and measuring impact.
Mutual fund family, and major name in the SRI world, Calvert was acquired by Eaton Vance; another fund family with a long SRI history, Pax World was purchased by Impax, and impact money manager First Affirmative was acquired by Folio Institutional.
Investing in women, pushing companies to add more women to their boards and C-Suites, and including more women in the upper echelons of financial services has been a theme throughout the year, with visibility best exemplified in the Fearless Girl statue installed by State Street Bank. In August, I interviewed Joe Keefe, CEO of Pax World about the importance of investing in gender equality. In December I was interviewed in a piece entitled, “Is Wall Street Still A Bastion For Male Domination?” The short version of my answer: “The makeup of our board rooms, C-suites, and companies should reflect the diversity of the broader communities in which we live. We’re pitifully behind as an industry but if everyone steps up, we can change the face of our industry for the next generation.”
4. Shareholder engagement
Large passive investors Blackrock and Vanguard publicly acknowledge the importance of corporate responsibility around climate action by joining major shareholder engagement proposals. “In late May during proxy season, the big three supported a shareholder resolution to require Exxon Mobil (XOM) to report on the impact of measures designed to hold climate change to two degrees centigrade, as outlined in the Paris climate accord. A minirebellion, garnering 62% of shareholders’ votes, came during proxy season that marked the first time BlackRock and Vanguard voted for a climate-related proposal. State Street had previously voted for such proposals.”
5. Increasing interest in impact
Most major financial services companies are adding resources in the Impact/ ESG/ Responsible Investing space, each naming it something a little different from their competitors. Investment services companies, like Morgan Stanley, UBS, and Blackrock have major impact investing offerings. Media and content companies like Forbes and Investopedia are dedicating resources to cover the space. Platforms such as Envestnet are Morningstar are developing impact offerings and tools. (Morningstars’ Jon Hale’s Medium blog is one of my favorite weekly reads.) And robo-advisors are making space on their platforms for the increased interest in impact investing; with two robos, Swell and OpenInvest, focusing exclusively on Impact Investing.
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